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From Our CIO’s Desk

How Does Kings of Capital Beat the Benchmark with Boring, Well-Managed Companies?

Over the past 1, 2, and 3-year trailing periods, our financial services strategy—the Kings of Capital Portfolio (KCP)—has outperformed its benchmark. Our investment process avoids chasing short-term market momentum, focusing instead on well-managed businesses that allocate capital with discipline. As interest rates enter an upward cycle, we believe KCP’s emphasis on high-quality positioning creates strong potential for relative outperformance.

Saurabh Mukherjea

Founder & CIO

What Makes Kings of Capital Differentiated from Other BFSI Funds?

Launched in July 2020, KCP follows an active, bottom-up stock selection process focused on identifying mispriced opportunities across the financial spectrum:

• Zero PSU Exposure: Out of more than 20 financial services funds in India, KCP is the only strategy with zero exposure to state-owned (PSU) banks and PSU financial institutions.

• Selective Mega-Cap Banking Exposure: KCP holds the lowest combined allocation to mega-cap banks (such as HDFC, ICICI, SBI, Axis, and Kotak) compared to industry peers.

• Targeted Niche Allocations: By tracking more than 35 financial institutions, we invest in under-represented, high-growth segments—including wealth managers, credit rating agencies, non-life insurers, mutual fund distributors, commodity exchanges, and cash management providers.

• Lower Historical Volatility: As a result of this positioning, KCP has maintained a portfolio beta of less than 1 since inception, reflecting lower historical volatility compared to broader financial indices.

Source: Marcellus Investment Managers using data from Bloomberg

What is Our Quality Framework for Stock Selection?

To build our concentrated portfolio of 20 to 25 holdings, we evaluate companies through five strict quality filters:

First, we prioritize prudent balance sheets by selecting asset-light businesses generating strong free cash flow and lenders with lower leverage than peers. Second, we target market leaders achieving profitable market share gains without diluting margins. Third, we back established management teams with proven value-creation track records, such as Bajaj Finance and Chola. Fourth, we insist on capital adequacy, favoring overcapitalized institutions like Kotak Bank that hold buffers to absorb economic shocks. Finally, we maintain strict valuation discipline, capping overall portfolio valuations at a maximum 20% premium over the benchmark index.

Why Will a Rising Rate Environment Separate Top-Tier Lenders from the Rest?

Global central banks have adopted tighter monetary stances, and domestic inflationary pressures are increasingly nudging the Reserve Bank of India toward policy recalibration and potential rate hikes.

While broad liquidity over recent years brought net non-performing assets (NPAs) across listed banks down below 1%, rising interest rates and elevated household debt levels are expected to test second-rung lenders. As Howard Marks observed, periods of prosperity often expand lending into riskier areas. As credit conditions tighten, performance is likely to diverge, creating a clearer separation in credit quality between top-tier institutions and secondary lenders. Well-capitalized franchises with prudent risk controls remain better positioned to protect asset quality and capture market share.

What Does This Mean for Your Capital in the Long Run?

Since 1991, Indian market cycles have typically seen 3–4 easy expansion years followed by 6–7 tougher compounding phases. Kings of Capital is built for these challenging periods, anchoring capital in high-return financial franchises to deliver resilient long-term compounding.

For a detailed breakdown read my full analysis by clicking here.

Tej Shah
Portfolio Manager

Multi Asset Portfolio

Rules based portfolio with a basket of different asset classes built on your financial goals providing risk-adjusted returns.

Portfolio Outlook

The strategy’s diversified positioning across five major asset classes chiefly, global equities, Cash, REITs, INVITs, Gold along with Indian equities, is expected to help investors navigate through period of heightened uncertainty going ahead.

What worked and what didn’t?

Allocation to gold, which was down almost 9.5%, drove most of the relative underperformance during the month partially offset by allocations to Indian equities and INVITs.

Performance of the scheme (Figures in %)

Source: Marcellus Investment Managers; Marcellus Performance Data shown is net of fixed fees and expenses charged till 30th June 2026 and is net of Performance fees charged for client accounts, whose account anniversary / performance calculation date falls upto the last date of this performance period; Returns more than 1-Year are annualized; other time period returns are absolute. For relative performance of particular Investment Approach to other Portfolio Managers within the selected strategy, please refer to https://www.apmiindia.org/apmi/welcomeiaperformance.htm?action=PMSmenu. The calculation or presentation of performance results in this publication has NOT been approved or reviewed by the SEC, SEBI or any other regulatory authority.

Vansh Gandhi
Portfolio Manager

MeritorQ Portfolio

Rules based Multicap strategy investing in relatively undervalued quality companies.

Portfolio Outlook

Portfolio remains positioned to weather uncertainty and benefit from possible earnings upgrades, with defensive allocation to large caps balanced by meaningful allocation in good quality small and midcap companies.

What worked and what didn’t?

Relative to the benchmark, the strategy’s higher allocation to small cap and pharma sector and underweight in PSU and oil and gas stocks helped, whereas, relative underweight in Financials was a drag.

Performance of the scheme (Figures in %)

Arindam Mandal
Head of Global Equities
Marcellus LLC

Global Compounders Portfolio

A gateway to investing in some of the best global companies from the Developed World.

Portfolio Outlook

August was a broadly flattish month, with markets pulled between higher oil prices and strong AI-related earnings on one side, and improving software and gold performance on the other. The strength in gold remains consistent with our long-term view that it deserves an allocation in the portfolio, while the recovery in software supports our view that high-quality, mission-critical software can coexist with AI.

The portfolio remains negatively exposed to higher oil prices through our aerospace and industrials holdings. Both groups had been performing well on continued earnings beats and raises, but gave back gains as oil rose on renewed US-Iran escalation fears. This has unfortunately become a recurring pattern this year, with solid company fundamentals repeatedly interrupted by macro and geopolitical developments.

It has now been roughly six months since the conflict began, and the portfolio has underperformed over that period. Nevertheless, we continue to find attractive opportunities capable of delivering low-to-mid-teens compounding at reasonable valuations, including European exchanges and wealth managers where we see a durable growth runway.

What worked and what didn’t?

Gold was a key positive contributor during the month, while software also performed well, led by ServiceNow. The principal laggards were aerospace and industrials, with several aerospace names declining by high single digits to low double digits as renewed US-Iran concerns resurfaced.

Performance of the scheme (Figures in %)

Source: Marcellus performance data is shown is in INR, gross of taxes and net of fees & expenses charged till end of last month on client account. Performance fees are charged annually in December. Since Inception returns are annualized. Marcellus’ GCP USD returns are converted into INR using USD:INR exchange rate from RBI – https://www.rbi.org.in/scripts/ReferenceRateArchive.aspx
Note: * Since Inception performance calculated from 31st Oct 2022. The inception date is 31st October 2022, being the next business day after the account got funded on 28th October 2022. S&P 500 net total return is calculated by considering both capital appreciation and dividend payouts. The calculation or presentation of performance results in this publication has NOT been approved or reviewed by the IFSCA or US SEC. Performance is the combined performance of RI and NRI strategies.

Rakshit Ranjan
Founder & Portfolio Manager

Consistent Compounders Portfolio

Concentrated portfolio of heavily moated companies that can drive healthy earnings growth.

Portfolio Outlook

In an uncertain macroeconomic environment shaped by AI disruption and shifting global geopolitics, CCP has evolved significantly. While maintaining a concentrated portfolio focused on quality businesses, we have diversified our top holdings across uncorrelated sectors such as healthcare, auto components, and export-led manufacturing.

This deliberate shift away from our historical reliance on large-cap consumption, financials and IT services helps mitigate AI related risks to jobs and the domestic growth slowdown. Furthermore, the portfolio optimizes across higher earning growth and valuation re-rating potential. CCP remains a concentrated strategy with over 40% of the portfolio allocated to the top-5 positions. Total number of stocks currently in the portfolio is 20. Stock selection is still done basis the quality of the underlying businesses. Expected earnings growth over the next 3-5 years across all portfolio constituents is mid-teens or higher. In terms of forward valuation multiples, weighted average P/E multiple of the portfolio is around mid-30s despite no exposure to IT services and a small exposure to lenders. Over the last five quarters, the portfolio constituents delivered acceleration in weighted average EPS growth from 10% YoY in Q1FY26 to 14% YoY in 2QFY26, 17% YoY in 3QFY26, 22% YoY in 4QFY26 and 23% in 1QFY27.

What worked and what didn’t?

CCP delivered a smart recovery in absolute as well as relative returns (16% alpha vs the index in the last seven months). Over this period, while Divis, CarTrade, Tube Inv and Dr. Lal Pathlabs have been the biggest performance-contributors, HDFC Bank and CMS have been the biggest detractors.

Performance of the scheme (Figures in %)

Source: Marcellus Investment Managers; Marcellus Performance Data shown is net of fixed fees and expenses charged till 30th June 2026 and is net of Performance fees charged for client accounts, whose account anniversary / performance calculation date falls upto the last date of this performance period; Returns more than 1-Year are annualized; other time period returns are absolute. For relative performance of particular Investment Approach to other Portfolio Managers within the selected strategy, please refer https://www.apmiindia.org/apmi/welcomeiaperformance.htm?action=PMSmenu. The calculation or presentation of performance results in this publication has NOT been approved or reviewed by the SEC, SEBI or any other regulatory authority.

Tej Shah
Portfolio Manager

Kings of Capital

Our financial sector focused investment strategy with a portfolio of NBFCs, wealth managers, rating agencies, banks, asset managers and other BFSI companies.

Portfolio Outlook

Momentum in the financial sector remains healthy, with banking sector credit growth picking up to ~20%. Additionally, the FCNR deposit mobilisation has beaten the most optimistic estimates despite closing a month earlier than previously announced. Our portfolio is well positioned to benefit from this positive external environment for banks and NBFCs.

Despite the recent rally during the financial year, valuations across several holdings remain attractive. Our portfolio delivered 25% earnings growth during the quarter ended June, 2206 but still trades at 19x P/E—near the lower end of its historical valuation range. Key risks to this view include a sharp slowdown in domestic economic activity or a rise in global interest rates.

What worked and what didn’t?

Over the last 12 months, top detractors in KCP were CMS Info Systems and HDFC Bank. The top contributors to the portfolio over the last 12 months have been City Union Bank and Nuvama Wealth.

Performance of the scheme (Figures in %)

Ashvin Shetty
Portfolio Manager

Little Champs & Rising Giants

SMID-cap strategies that invests in companies with good corporate governance, capital allocation and competitive advantages.

Portfolio Outlook

Aggregate portfolio 1QFY27 earnings performance held up well: portfolio-average revenues grew about 16% and profits about 17% year-on-year, a touch ahead of the cautious stance we had taken into the year, when Middle East-driven headwinds around supply chains and raw material inflation looked set to bite harder. Operating leverage and tight cost control largely absorbed the gross-margin pressure.

With the region still unsettled, our approach is unchanged — stay disciplined on valuation and keep testing what the conflict could mean for portfolio earnings — while our cash buffer continues to soften drawdowns and gives us room to add on weakness. Looking further out, the roughly half of the portfolio that now sits in manufacturing exporters leaves us well-geared to India’s export push, helped by a competitive rupee and the newly signed FTAs.

What worked and what didn’t?

Turning to attribution over the three months to August 31, 2026, the biggest drags came from CMS Info Systems, where 1QFY27 revenues were flat and profits fell; Go Digit, on a sharp drop in first-quarter earnings; and Natco Pharma, as the Revlimid unwind continued to weigh on results. On the other side, Uniparts India led the gainers on a strong quarter of double-digit revenue growth and a steep rise in profit, with Pearl Global and City Union Bank close behind, both on healthy 1QFY27 numbers.

Performance of the scheme (Figures in %)

Performance data shown is net of fixed fees and expenses charged till 30th June 2026 and is net of annual performance fees (except for Little Champs Portfolio) charged for client accounts whose account anniversary/performance calculation date falls upto the last date of this performance period. For Little Champs Portfolio, performances fees are charged on cumulative gains at the third anniversary of the respective client account, the effect of the same has been incorporated for client accounts whose third account anniversary falls upto the last date of this performance period. Returns more than 1-Year are annualized; other time period returns are absolute. For relative performance of particular Investment Approach to other Portfolio Managers within the selected strategy, please refer to https://www.apmiindia.org/apmi/welcomeiaperformance.htm?action=PMSmenu. The calculation or presentation of performance results in this publication has NOT been approved or reviewed by the SEC, SEBI or any other regulatory authority

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Marcellus Investment Managers Private Limited (“Marcellus”) is regulated by SEBI to act as a Portfolio Manager and Investment Manager to AIF. Marcellus is regulated by the IFSCA as a Fund Management Entity – Retail to render investment management services. Marcellus is also registered with the US Securities and Exchange Commission (“US SEC”) as an Investment Advisor. Marcellus International Investment Managers LLC (“Marcellus LLC”) is a wholly owned subsidiary of Marcellus, based in the USA. No content of this publication, including performance-related information, is verified by SEBI, IFSCA, or the US SEC
If the recipient is based outside India or the US, Marcellus may not be regulated in such jurisdiction, and this material is not a solicitation to use Marcellus’s services.
This communication is confidential, privileged, and intended solely for the addressee. If you are not the intended recipient, any use or access is prohibited; please notify the sender immediately. This material contains proprietary information and requires prior written consent from Marcellus before reproduction in any form.
Data, examples, and forward‑looking statements are based on publicly available sources and may include assumptions. Past performance is not indicative of future results. Actual results may differ materially due to market risks, economic conditions, uncertainties and inflation; there is no assurance that investment objectives will be achieved.
Recipients are solely responsible for their actions and are urged to read the Disclosure Document, Form ADV, and Form CRS, and consult their own legal/tax advisors before investing. Marcellus, its directors, and employees shall not be liable for any loss or damage (direct, indirect, punitive, or consequential) arising from the use of this material.
Stocks described herein are for illustration purposes only and are not recommendations. As these stocks may form part of the portfolios, Marcellus, its clients, employees, and their immediate relatives may have interests or stakes in them
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Marcellus Portfolio Updates & Insights – September 2026

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Global Compounders Portfolio

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